OVERVIEW AND THE NECESSITY OF THE RESEARCH
Overview
In today's globalized world, the rapid advancement of information technology and trade liberalization has significantly boosted economic development across nations Vietnam's accession to the WTO on November 7, 2006, has created numerous opportunities, while also presenting various challenges To thrive in this competitive market, businesses must establish both long-term and short-term strategic plans.
The necessity of the research
In recent years, Vietnam's economy has experienced significant growth and stability, marking its integration into the global market The country has normalized relations with key organizations, including the International Monetary Fund (IMF) and the World Bank (WB), and has joined the ASEAN Free Trade Area The banking sector plays a crucial role in this development, significantly influencing the economy while remaining sensitive to domestic and international political and social changes.
In today's fiercely competitive banking landscape, it is essential for each bank to implement effective strategies to maintain market share, capitalize on opportunities, and mitigate risks during periods of opening and integration Banks must prioritize the development of a robust strategic orientation to navigate challenges, enhance competitiveness, and foster sustainable growth Ultimately, strategic management serves as a fundamental business philosophy that enables banks to achieve long-term success.
PG Bank, a prominent Commercial Joint Stock Bank in Vietnam, boasts an extensive branch network nationwide, establishing a strong market presence Despite its reputation, the bank faces certain challenges that require attention to enhance its competitive edge Consequently, research and strategic recommendations are crucial for PG Bank's development from 2010 to 2015, enabling the bank to navigate challenges and capitalize on opportunities amid Vietnam's shift towards regional and international integration.
PG Bank’s Board of Directors is committed to advancing the bank in alignment with its strategic goals of security, trust, and effectiveness, while also enhancing its brand recognition and reputation This focus on development underscores the importance of maintaining and strengthening PG Bank’s position in the market.
The study outlines the evolution and strategic management of PG Bank, highlighting its journey from modest beginnings to its current status It assesses the bank's strengths and weaknesses while identifying potential opportunities and threats that could impact its future growth.
Our research leverages data from past strategic implementations and economic forecasts, focusing on the period from 2011 to 2015 We analyze the country's economic situation during this timeframe to inform PG Bank's future strategy development.
The meaning of the research
Setting up an overall orientation in the period of 2011-2015 with clear objectives to announce broadly within the bank and mobilize the inputs to successfully perform the assigned goals.
OBJECTIVES OF THE RESEARCH
Overall objectives
Creating PG Bank a rationale for sustainable development and becoming one of the leading financial institutions in Vietnam.
Concrete objectives
Forming and developing breakthrough strategies for PG Bank in the period of 2011-2015, namely in the below listed solutions:
Developing the bank’s culture philosophy
Investment for development and increase the market share.
SUBJECT AND SCOPE OF THE RESEARCH
Subject of the research
The capstone project analyzed PG Bank's business operations over recent years, identifying key factors that influenced its strategic approach It aimed to develop a comprehensive strategic business plan for the bank, along with actionable solutions to achieve its established objectives.
RESEARCHING METHODOLOGY
This capstone research is grounded in the guidelines and policies of the Vietnamese banking sector, incorporating practice-oriented activities alongside theories of strategic and marketing management It utilizes a wealth of information and data sourced from various websites, magazines, and reports from multiple banks to provide a comprehensive analysis.
STRUCTURE OF THE RESEARCH
Apart from the foreword and conclusion, the capstone is structured as follows: Chapter I: Rational Foundation and the Development of an enterprise’s business strategy
Chapter II: Analyzing PG Bank current business strategy
Chapter III: Business strategy of PG Bank by 2015.
RATIONAL FOUNDATION AND THE DEVELOPMENT OF AN ENTERPRISE’S BUSINESS STRATEGY
THE BUSINESS STRATEGY OF AN ENTERPRISE
According to the Strategic Management textbook issued by Griggs University:
A business strategy comprises a collection of objectives and policies established by a team, guiding decisions made by owners and shareholders It plays a crucial role in determining the industry in which a company will operate and outlines the competitive approach to be adopted.
Michael Porter defines strategy as the process of establishing a distinctive position and value for a company This involves differentiation and making strategic choices to optimize resource utilization, ultimately leading to competitive advantages.
Strategic planning defines an organization's long-term direction and scope, aiming to achieve a competitive advantage by effectively mobilizing and managing resources in a dynamic environment This approach focuses on fulfilling market demands and meeting the expectations of various stakeholders.
The strategy aligns with the enterprise's objectives by guiding the implementation of chosen actions and methods It coordinates all resources and capacities while considering external opportunities and threats, as well as competitive choices and trade-offs, to ensure harmony among the company's activities.
Strategic management involves five key tasks: formulating prospective strategies and defining the mission, establishing clear goals, creating strategies to achieve those goals, implementing the chosen strategy, and continuously evaluating, monitoring, and adjusting as needed throughout the process.
2009) As a result, strategic management is a continuous activity to establish and maintain strategic direction and business operations for an organization in order to resolve challenges.
1.1.2 The role of business strategy.
In a competitive market economy, companies must adopt effective management strategies to seize opportunities and leverage competition By implementing these strategies, businesses can enhance their agility and responsiveness to market changes, make informed decisions, optimize operations, capitalize on opportunities, address weaknesses, mitigate threats, and ultimately strengthen their competitiveness while preserving their market share.
Specialization has significantly enhanced productivity and efficiency within businesses To fully leverage available resources and establish a new competitive advantage, companies must swiftly capitalize on market opportunities.
Strategic management plays a vital role in an organization's operations, significantly influencing its successes and failures By adopting a proactive approach, strategic management empowers companies to anticipate future challenges and opportunities, ensuring they remain active participants in their industry rather than merely reacting to changes.
There are different strategies used in an organization, but basically there are three levels that used frequently:
Company level: Set up goals and business activities of the company, create policies and plans to achieve the goals.
Business level: Determine the business market of the company, the segmentation and products for each market
Strategy level: Define solutions and plans for each business field.
1.1.4 Some business strategies in the actual banking sector.
Banking is a specific sector, therefore it also have some remarkable business strategies as follows:
Improving market share: strengthen and improve the bank’s image and reputation to resolve debts, improve product quality and services to attract customers, maintain and develop the market share
Diversifying products and services: diversify products and services in different operations to satisfy the customers’ highest demands and attract new customers
To enhance competitiveness and attract more customers, banks should focus on diversifying and expanding their distribution channels By widening their service areas, they can provide clients with more convenient options for transactions, ultimately improving customer experience and satisfaction.
Focus: the company collects all its resources to achieve the objectives of growth and high efficiency
Differentiation: develop plan based on the available strengths and characteristics to achieve the goals
SETTING UP AND SELECTING THE BUSINESS STRATEGY
We can summarize the phases and activities through the following table:
Table 1-1: Different phases in the process of setting up strategy
2 Combine information to come up with feasible strategies
3 Use all general evaluated information to select the best strategy for the company
Strategic planning involves defining a business mission, analyzing internal and external factors, establishing long-term goals, and choosing from various strategic alternatives This crucial phase lays the foundation for effective strategy development.
Phase 1: Strategists work with data collection, combined with intuitive, real analysis and selection made with alternative strategy through a number of strategic management techniques such as External Factors Evaluation matrix (EFE), Internal Factors Evaluation matrix (IFE).
Phase 2: By using the arrangement of elements collected from the internal and external environment of the enterprise to make the strategy feasible by using tools such as the SWOT matrix, the SPACE matrix.
Phase 3: By using the information in stage 1, objective evaluation in phase 2 to choose a business strategy through a number of key tools like the QSPM matrix, the GREAT matrix.
Strategists must make strategic decisions that maximize operational effectiveness and benefit the company in the long run These formative decisions will strongly link the organization to its products, markets, and technologies for an extended period Ultimately, the long-term competitive advantage is established through these strategic choices, making this phase crucial for sustained success.
The external environment significantly impacts business performance and is comprised of factors beyond the control of management One key component of this environment is the macro-environment, which includes various elements that can influence business operations and goals.
Factors that are affecting directly the economy, the enterprise gives out policies and suitable business activities.
The integration of regional and global economies necessitates an understanding of worldwide economic trends, the identification of potential markets, and an exploration of the evolving political and economic landscapes in international business.
Analyzing the macro environment is crucial for banks and businesses, as it enables them to identify significant changes in external factors This analysis helps organizations recognize both opportunities and challenges presented by the macro environment.
The micro environment encompasses various factors that directly affect a bank, including competitive actions and reactions within the industry This environment significantly influences businesses operating in the same sector, shaping their strategies and performance.
For that reason, analyzing factors in micro-environment will allow businesses that they face that resulted in the change the five forces, thereby build the appropriate strategy.
1.2.2.3 The External Factors Evaluation Matrix (EFE).
The EFE Matrix is built following these five steps
List factors: Gather a list of external factors Divide factors in to two groups: Opportunities and Threats.
Assign a weight to each factor The value of each weigh should be between
0 and 1.0 means the factor is not important 1.0 is very important The total value of all weighs should equal 1.0
To evaluate the effectiveness of the firm's current strategies, each factor should be assigned a rating on a scale of 1 to 4 A rating of 1 indicates a poor response, while a 2 signifies a below-average response A rating of 3 reflects an above-average response, and a rating of 4 denotes a superior response.
Multiply each factor weight with its rating This will calculate the weighted score factor
Add all weights scores for each factor This will calculate the total weighted score for the company.
The Competitive Profile Matrix (CPM) provides the Company with a clear overview of its strengths and weaknesses in comparison to industry competitors This matrix builds upon the External Factor Evaluation (EFE) Matrix by incorporating weights for each factor, clarifying the significance of these weights and calculating a total weighted score Unlike the EFE Matrix, the CPM focuses on specific factors that facilitate direct comparisons Ultimately, the total weighted scores of competitors are evaluated against those of selected model institutions.
The internal environmental analysis of a bank involves evaluating its conditions and resources, focusing on both tangible and intangible elements This process helps identify the organization's strengths (S) and weaknesses (W), enabling the formulation of strategies that leverage strengths while addressing weaknesses By optimizing these internal factors, banks can enhance their business operations and achieve greater success in the competitive financial landscape.
1.2.2.6 The internal factor evaluation matrix (IFE).
The IEF Matrix is set up through 5 steps:
List factors including strengths and weakness that affect the company.
Classify the weight of each factor base on a scale 0 – 1.
Identify the weigh for each factor base on a scale from 1 to 4
Multiply the weight of each factor with its rating to have the weighted score
Sum the weighted score for each factor to have to total weighted score
If the total weighted score of the Matrix is below 2.5: the company is weak at internal factors and if it is above 2.5: the company is strong at internal factors
1.2.3 Setting up and selecting feasible business strategies
Utilizing IFE and EFE matrices allows businesses to assess their current position by calculating the weighted scores along the vertical and horizontal axes The intersection of these two axes reveals the company's standing and guides the strategic decisions it should pursue moving forward.
The SWOT matrix: Are tool combines strengths (S), weaknesses (W), opportunities (O) and threats (T) from the environment to come up with strategies.
Through SWOT matrix, following strategy could be planned:
SO Strategy: Using internal strengths to make use of external opportunities.
WO Strategy: Overcome weaknesses by make use of external opportunities.
WT Strategy: minimize risks to avoid external threats.
ST Strategy: Using strengths to avoid risks
The SWOT Matrix is an effective tool for analyzing a company's strategy by assessing its internal Strengths and Weaknesses alongside external Opportunities and Threats This model simplifies information evaluation, making it easier to understand the company's current status and strategic position.
SO strategy: Using strengths to make use of opportunities
WO strategy: Overcome weaknesses by make use of opportunities.
Threats (T) ST strategy: Using strengths to avoid risks.
WT strategy: minimize risks to avoid threats.
To analyze the SWOT of an enterprise, we have to take into account of:
Strengths: Advantages, main and necessary resource of the enterprise
Weaknesses: Know your weaknesses to avoid and overcome We need to look at all the internal and external factors as well as our competitors to improve the company situation.
Opportunity: Make use of opportunities and avoid wasting opportunity
Threats: Knowing what threats are happening Analyzing if the change in technology causes any threats for the company? Which threats need to be warned about?
The selection strategy is a crucial phase in the overall business strategy process, where strategists choose the optimal strategy based on insights gathered during the input control phase This decision-making process is largely subjective, relying on objective data to guide choices By identifying the appropriate strategy, companies can better achieve their responsibilities and objectives Although various methods and tools exist to aid in strategy evaluation and selection, this article focuses on two effective tools: the SPACE and GREAT Matrices Among these, the SPACE Matrix serves as a valuable instrument for determining a company's strategic decisions.
The factors include Financial Strengths (FS), Competitive Advantage (CA), Environmental Stability (ES) and Industrial strengths (IS) of the company
The GREAT Matrix is form according to the following scheme:
Rating Weighted Score Rating Weighted Score
THE CHARACTERS OF BANKING SECTOR THAT AFFECT
1.3.1 Potentials and needs of using banking services.
The potential is the element that affects the company the most The listed factors can help us the need for future banking service:
The increase of population in urban area, the increasing amount of industrial zones and residencies leads to the increase in need of banking service
The average income of the people increases The volume of needs is getting bigger and the bank can make use of the scale improve business activities and services.
The structure of total payment.
1.3.2 The management of State bank.
The State Bank (SB) serves as a key state agency responsible for managing the nation's currency and monetary policies It oversees the issuance of currency, exchange rate policies, interest rate regulations, and foreign reserves management Additionally, the SB plays a crucial role in drafting banking and credit legislation, ensuring that financial policies are effectively implemented within the economy Consequently, all banks must adhere to the laws and regulations established by the State Bank when formulating their strategies.
1.3.3 The development level of related and supporting sectors.
The growth of the banking sector is closely intertwined with the advancement of related industries, including securities, insurance, and information technology (IT) These interconnected fields mutually reinforce one another, facilitating overall business development and enhancing financial services.
The development of this field raises capital and channels for new investment, reduce risk, reduce transaction costs The IT creates credit cards, automated teller machines, etc.
Therefore, the presence and development of related and support fields will increase the productivity and competitiveness to the banks
Competitors in the banking industry are well-acquainted with one another, leading to frequent strategic confrontations However, banks must balance competition with cooperation, as the failure of one institution can negatively impact the entire credit system's stability.
1.3.5 Internal factors of the bank.
Banking is a sophisticated service sector with high risk, therefore, the banking industry requires highly on human resources, capital, technology base and science.
Human resources is reflected in factors such as: the level of education, professional proficiency, motivation, level of attachment to the enterprise, manner and working style.
Technology is a crucial element in banking, as it enhances operational efficiency by reducing processing times and increasing accuracy It facilitates convenient banking services, fosters the development of modern financial solutions, and aids in identifying potential risks within the institution.
Reputation of the bank gains customers’ trust, attracts customers, enhances competition.
Banks that provide a diverse range of high-quality services tailored to market demand can gain a competitive advantage, leading to more stable development and increased efficiency.
Network operating system is very important to the operation of banks
Effective management capabilities enhance and sustain the operational efficiency of banks The organizational structure of a bank is characterized by the division of functional departments, supporting divisions, and the interrelationships between these entities.
To achieve success, enterprises must establish clear annual and long-term goals within their business processes, with a well-defined business strategy serving as the roadmap to these objectives Chapter I outlines essential concepts of strategy and strategic management, providing a theoretical foundation for the development, selection, and implementation of effective strategies This framework is crucial for analyzing the current status of PG Bank and identifying suitable business strategies for its operations.
STRATEGIC ANALYSIS OF PETROLIMEX GROUP
History of establishment and development of PG Bank
The initial name of Petrolimex group commercial join stock bank (abbreviation: PG Bank) was Dong Thap agricultural commercial joint stock bank In
In 1993, the Dong Thap Agricultural Commercial Joint Stock Bank was established in Dong Thap province with a chartered capital of 700 million VND, authorized by the State Bank of Vietnam To restructure and enhance its operations, the bank invited new shareholders in July 2005, raising its chartered capital to 90 billion VND, including notable investors like Vietnam Petrolimex Corporation and Saigon Securities Institution In March 2007, the bank transitioned to an urban commercial bank and was renamed Petrolimex Group Commercial Joint Stock Bank, following Decree no 125/QĐ-NHNN This transformation enabled PG Bank to broaden its national network and engage in international payments and foreign currency trading.
In 2010, PG Bank officially relocated its headquarters from Dong Thap to Hanoi, in accordance with Decree No 3209/QĐ-NHNN dated December 25, 2009 The new headquarters is situated at Office No 5, Building 18T1-18T2, in the Trung Hoa Nhan Chinh new urban zone.
Le Van Luong street, Nhan Chinh ward, Thanh Xuan District, Hanoi
The developments of PG Bank:
On 26th June 2007, PG Bank officially opened its branch in Hanoi, marking its participation in heated bank market of major economic area – Hanoi.
In December 2008, PG Bank increased its chartered capital to 1,000 billion VND
In November 2008, PG Bank was classified as “A level bank” by State Bank of Vietnamese and allowed to do international payments
On 29th March 2009, PG Bank was awarded as Strong Vietnamese Brand
2008 by Viet Trade Promotion Agency and Vietnam Economic Times.
In December 2009, PG Bank was proudly awarded as Top Trade Services
N 4th April 2010, PG Bank was awarded as Strong Vietnamese Brand
2009 This is the second year that PG Bank was awarded this prize.
In December 2010, PG Bank was proudly awarded A level bank in 3 consecutive years by State Bank of Vietnamese (According to report no 2097/NHNN-HAN8 date 14/12/2010).
PG Bank was one of the top banks operating in financial services awarded
“Top Trade Services 2010” This is the second year that PG Bank was awarded this prize.
As of December 31, 2010, total assets amounted to 16,378 billion VND, reflecting a 58% increase from 2009, while liabilities rose by 74% to reach 10,886 billion VND, surpassing the industry growth rate of 27.65% Profits before tax reached 316.8 billion VND, achieving 109% of the planned target, with a profit before tax ratio of 29% and a profit after tax ratio of 22%, marking a 7% increase from the previous year The chartered capital stood at 2,000 billion VND.
As of 2010, PG Bank operated 64 branches, transaction offices, and commercial centers in key economic regions across Vietnam Looking ahead, the bank plans to expand its network nationwide in line with current trends.
Organizational Structure
(Source: Annual Report of PG Bank 2010)
Chart 2-1: Organizational structure of PG Bank.
By 30th December of 2010, the structure of shareholders is:
Shareholders Number of shareholders Equity capital Ownership ratio
Shareholders Type of shares Total value Ownership ratio
Saigon Securities Institution Common shares 199,500,000,000 9.98%
Shareholders’ meeting is organized once a year, after 5 years (except first year), the election is organized to appoint, dismiss the positions of chairman,
In general, organizational structure of our bank has been specialized to create most favorable environment for product developments
Vision and Mission of PG Bank
PG Bank aims to establish itself as a leading commercial bank in Vietnam by developing a skilled and dedicated team The bank focuses on delivering valuable financial solutions at low costs, ensuring high levels of customer satisfaction for both corporate and personal clients.
PG Bank always tries to create unique organizational culture in the period of world integration The corporate culture focuses on 5 core values
With these above directions, despite 18 years of operations, PG Bank has been actually recognized in recent 3 years and become a sparkle in the financial and banking market in Vietnam.
EXTERNAL ENVIRONMENT ANALYSIS
Macro environmental factors affecting business activities are:
Vietnam is a socialist republic with a single-party political system led by the Communist Party, which emphasizes the principle of party leadership, state management, and public oversight Recognized for its political stability, Vietnam fosters a socialist-directed market economy that is continually evolving The government is committed to modifying and enhancing economic policies to create a favorable legal environment for investors This stable political landscape serves as a solid foundation for economic activities, particularly benefiting the banking sector and PG Bank, especially given the support from major shareholder Petrolimex.
The legal framework for banking activities in Vietnam has been significantly enhanced to align with global economic integration and improve the efficiency of cash flow management Key modifications, such as the State Bank of Vietnam’s Law and the Law of Credit Agencies, were enacted in 2003 and 2004, with further developments introduced on June 16, 2010, set to take effect on January 1, 2011 These updates aim to create a modern banking system that adheres to international standards while reducing government intervention in banking operations Continuous improvements, including the Law of Assignment Instruments (49/2005/QH11), the Law of Securities (70/2006/QH11), and the Law of Electronic Transactions (51/2005/QH11), have further loosened control over banking services and the financial market, providing a robust legal foundation for institutions like PG Bank to thrive.
The State Bank of Vietnam has achieved notable success in administering monetary policies, leading to the stabilization of the Vietnamese currency and fostering economic growth while ensuring the banking system's stability and development The transition to indirect monetary policy instruments, such as open market operations and flexible exchange rates, has replaced previous administrative methods Interest rates have been liberalized, and foreign currency and credit regulations have become more flexible, granting banks greater control and responsibility Additionally, policies regarding bankruptcy, mergers, organizational structure, loan regulations, deposit guarantees, credit risk management, and fund management significantly impact banking operations.
In 2010, Vietnam's economy exhibited a strong recovery following the global economic recession, with an impressive average GDP growth rate of 7% per year from 2006 to 2010 By the end of 2010, the GDP per capita reached 1,160 USD, highlighting the nation's economic progress during this period.
Graph 2-4: GDP growth rate from 2008 to 2010.
Vietnam's economy is showing strong recovery signs, particularly in the industrial sector, which is the primary driver of growth The industrial production value index rose by 14% compared to 2009, while the service sector also rebounded, albeit at a slower rate, with a growth rate of 7.5% in 2010 Additionally, the total production values of agriculture, forestry, and aquaculture increased by 2.8% This upward trend in GDP provides a solid foundation for PG Bank to expand its network.
Investment plays a crucial role in economic recovery, with social venture capital reaching 800 billion VND in 2010, a 12.9% increase from 2009, accounting for 41% of GDP Individual and resident contributions made up 31.2% of this capital, while state investment rose by 4.7% to 22.5% Foreign direct investment (FDI) also showed promise, attracting 883 new projects with a registered capital of 13.3 billion USD, equivalent to 60% of the previous year's total Operating capital increased by 9.9% to 10 billion USD, indicating a healthier ratio of operating capital to registered capital despite lower overall FDI registration compared to 2009 These trends highlight the positive accumulation of domestic investment potential while also revealing challenges in capital efficiency.
In 1997, the economy experienced a growth rate of 8.2%, supported by investment capital representing 28.7% of GDP; however, maintaining a similar growth rate of 8.5% would have required an investment of 43.1% of GDP By 2010, despite total social venture capital reaching 41% of GDP, the growth rate had declined to 6.7% The high Incremental Capital-Output Ratio (ICOR), exceeding 8 compared to 6.6 in 2008, indicates inefficiencies, particularly within state-owned enterprises where the ICOR ranged from 9 to 10, compared to 3-4 for private limited liability companies Additionally, issues such as delays in state budget disbursements, government bond investments, and administrative waste have raised concerns for both short-term and long-term economic stability In this challenging environment, PG Bank must develop targeted policies to cater to specific customer groups and industries.
Graph 2-5: Inflation rate in 2010 throughout months
The inflation rate in Vietnam during 2010 reached exceptionally high levels due to several factors Economic recovery spurred increased demand for goods and services, particularly food, while natural disasters and floods in central Vietnam further exacerbated this demand Additionally, rising import prices in the global market, driven by economic recovery, significantly impacted production costs Persistent issues, such as inadequate financial discipline in public investments and the operations of state-owned enterprises, also contributed to high inflation Consequently, the government's strategy of stimulating investment through relaxed credit for state-owned companies, coupled with insufficient oversight, led to inflationary pressures Furthermore, adjustments to the discount rate and rising commercial bank loan interest rates at the end of 2010 continued to influence inflation into early 2011.
Exchange Rate: In recent years, State Bank of Vietnam consistently maintained stabilizing Vietnam Dong in comparison with US dollar policies. Exchange rate developments are quite complicated in 2011
Graph 2-6: Fluctuations in exchange rate VND over USD
In the last quarter, the exchange rate experienced fluctuations, leading to a depreciation of the Vietnam Dong and heightened tension in the foreign currency market This instability stemmed from macroeconomic issues such as excessive spending, trade deficits, and low capital efficiency, resulting in higher demand for foreign currencies than supply Given the rising inflation and monetary market instability, it is crucial to implement strategic measures to manage the exchange rate, curb inflation, and stabilize the monetary market.
The impacts of inflation and exchange rate were challenges for PG Bank in forecasting to operate liabilities/assets administration policies, making sure best use of assets
Graph 2-7: Balance Sheet from 2005 to 2010.
The state balance sheet is projected to reach 637,200 billion VND, reflecting a 9.4% increase from expectations and a 9% rise since 2009 The estimated over-expenditure stands at 117,100 billion VND, accounting for 5.95% of GDP, which is a decrease from both 2009 (6.9%) and the planned figure (6.2%) These results indicate positive progress in the context of economic recovery, although over-expenditure remains high, not falling below the previous threshold of 5%.
Generally, some of macro factors have significant influences on capital mobilizing and loan activities of PG Bank Nevertheless, with professional leaders,
PG Bank overcame difficulties and developed better than other banks.
Vietnam ranks as the third largest population in ASEAN and the thirteenth largest globally, with a population of 86,024 thousand as of 2009, according to the Bureau of Statistics The urban population constitutes 29.6%, while the rural population accounts for 70.4% Rapid urbanization has led to an increase of 9.47 million people in urban areas since 1999, with an annual average growth rate of 1.2% from 1999 to 2009, marking a decrease of 0.5% compared to the previous decade and the lowest rate in 50 years Hanoi, with a population of 6,448,837, is the second most populous city in Vietnam It is projected that by 2020, urban residents will comprise 40% to 50% of the total population This demographic shift is likely to drive the demand for banking services, as rising incomes and improved living standards create favorable conditions for the development of financial services, including increased deposits and a wider array of banking products.
Together with GDP growth, GDP per capita increased as well At the end of
In 2009, Vietnam transitioned from a poor country to a low and average income nation, achieving a GDP per capita of $1,000, with expectations to reach $1,200 by the end of 2010 This growth in GDP per capita has significantly enhanced living standards and savings, leading to an increased demand for investments and consumer loans As a result, individuals are turning to the financial market for investment consultancy, portfolio management, and various banking services The rising demand for financial and banking services presents a lucrative opportunity for these sectors to flourish Recognizing this potential, PG Bank established its Retail Banking division at the end of 2010 to cater to personal customers more effectively.
Vietnam's technology sector is rapidly advancing, significantly influencing both daily life and business operations Companies are increasingly utilizing websites to showcase products, facilitate virtual exchanges, conduct transactions, and sign contracts via email.
In recent years, the Vietnamese banking sector has embraced technological advancements as a competitive advantage, investing significantly in innovations such as electronic inter-bank money transfers for instant international payments, 24/7 automated ATM services, the SWIFT system for global transactions, and enhanced Internet Banking capabilities.
VN Top, to pay electronic bills, taxes, and train tickets.
Internet processing has been implemented in almost every bank; many jobs have been done online.
PG Bank prioritizes customer satisfaction by offering modern services and seamless payment solutions With continuous advancements in technology, customers can effortlessly transfer funds and make online deposits, enhancing their overall banking experience.
INTERNAL ENVIRONMENT ANALYSIS OF PG BANK
Being aware of the integral role of human resources to the success of the bank,
To retain skilled employees, the bank employs a rigorous recruitment process that aligns job descriptions with candidate qualifications, ensuring the right fit for each position Notably, 70% of the staff hold undergraduate or higher degrees, underscoring the bank's commitment to attracting top talent.
The bank implements transparent compensation policies for its employees, ensuring that salaries are aligned with business performance and job positions, while maintaining an average income that exceeds the regional standard Additionally, staff members are actively encouraged to enhance their professional skills through continuous learning and development opportunities.
Corporate culture is a crucial element in assessing human resources at PG Bank, where every employee is committed to understanding and enhancing the bank's image and brand in both domestic and international markets.
Financial ability is the determining success factor in business activities of the bank This is the evaluation of financial ability of PG Bank until 2010.
Results of operations of the PG Bank from 2008 to 2010:
The situation of capital mobilization and increase in liabilities of banking system from 2003 to 2010:
Graph 2-12: The situation of increase in liabilities of banking system
The business situation of PG Bank throughout years according to these factors: Table 2-13: The business situation of PG Bank from 2008 to 2010
(Source: Annual Report of PG bank year 2009, 2010)
In 2010, PG Bank underwent significant organizational changes as part of a restructuring initiative that began in 2007, aiming to establish itself as a leading financial institution in Vietnam The bank's operations are primarily focused on three key areas: capital mobilization, loans, and foreign currency trading While efforts have been made to develop additional services such as cards, derivatives, and investments since 2010, the bank has struggled to assess the success of these initiatives accurately Nevertheless, the financial performance of PG Bank can be evaluated through its core traditional activities.
In 2010, capital mobilization activities experienced significant growth, continuing the upward and sustainable trends from previous years By the end of 2010, the total mobilized capital reached 13,995 billion VND, marking a 54% increase from 2009 and surpassing the average market growth rate The capital structure is detailed below.
Table 2-14: Capital mobilization situation of PG Bank from 2008 to 2010
2010/2009 Mobilization from economic organizations and residents 2,366 6,946 10,776 193.6% 55.1%
(Source: Annual report of PG Bank 2008, 2009 and 2010)
2010 is a hard year for financial market when a lot of banks faced difficulties in mobilizing capitals However, PG Bank still kept developmental pace positively.
Receive big house” These promotional programs brought benefits for customers. Therefore, capital mobilization from residents and economic organizations increased both relatively and absolutely,
Analysis about quality of loan.
Table 2-15: The situation of liabilities based on debt quality from 2008 to 2010
(Source: Annual Report of PG Bank 2008; 2009; 2010)
Analysis about loans in time series.
Table 2-16: The situation of liabilities in time series from 2008 to 2010
(Source: Annual report of PG Bank 2008; 2009; 2010)
Analysis based on monetary unit.
Table 2-17: Loan situation in monetary units from 2008 to 2010
Foreign currency and gold loan 148 688 1,940 364.9% 182.0%
(Source: Annual report of PG Bank 2008; 2009; 2010)
Analysis based on the loan structure of Petrolimex.
Table 2-18: Loan situation for corporate outside of Petrolimex
This year, PG Bank has demonstrated significant growth in loan activities, achieving a debt growth rate of 73.7% compared to 2009, surpassing the market average The bank has maintained a balanced structure of short-term to medium- and long-term liabilities, accounting for 65% to 66% of total liabilities Additionally, PG Bank has strengthened its control measures before, during, and after the loan approval process, resulting in a manageable bad debt ratio of 1.42%, thereby enhancing the bank's overall safety.
In 2010, PG Bank made significant strides in credit activities by participating in the Small and Medium Enterprise Finance Program III, funded by the Japanese government This initiative aims to support Vietnamese SMEs through commercial banks by offering favorable medium-term and long-term interest rates PG Bank's selection for this program enhanced its reputation and provided valuable support to local enterprises in their business endeavors.
By the end of 2010, PG Bank served a total of 74,643 customers, including 3,843 corporate clients and 70,000 individuals, with small and medium enterprises accounting for 95% of corporate customers The bank's loan distribution within the Petrolimex zone was relatively low, representing only 10.6% of its total loans Despite this, personal credit activities showed promising results, leading to a 44% increase in individual customers.
2009 Growth rate of personal credit was 39% Liabilities were 2,547 billion VND in 2010
Table 2-19: Foreign currency trading situation from 2008 to 2010
2010/2009 Turnover of foreign currency trading 57,090 116,067 145,890 103.3% 25.7%
PG Bank achieved a net profit of 28.9% from capital mobilization activities in the inter-bank market, with profits ranging from 15% to 41% By implementing a single price system, branches with excess capital sold to headquarters, which then redistributed funds to branches in need This balancing act not only optimized capital utilization but also enhanced PG Bank's payment capabilities and reputation in the inter-bank market, ultimately contributing to the overall effectiveness of its banking operations.
In 2010, despite the ongoing trade deficit that led to an imbalance in foreign currency supply and demand, PG Bank demonstrated positive trends in its currency trading activities The bank maintained its position as the leading institution in foreign currency trading, achieving revenues of 7.71 billion USD (approximately 145,890 billion VND), which marked a significant increase of 25.7% compared to 2009's revenue of 6.5 billion USD.
In 2010, PG Bank achieved significant success in the inter-bank foreign currency trading market, generating trading revenues of 4.6 billion USD, which marked an impressive 80% increase from the previous year This remarkable growth was largely attributed to the support received from Petrolimex, which played a crucial role in driving the bank's trading activities.
Other activities: Even though activities just started recently, these activities grabbed certain success
PG Bank has developed a robust portfolio of international payment services, operating 13 CITADs for both domestic and international transactions The bank facilitates overseas money transfers through the SWIFT network using the Nostro system, partnering with major financial institutions like Citibank and Wells Fargo Currently, PG Bank has established relationships with 234 banks across 41 countries, laying a strong foundation for future service expansion.
The newly implemented card activities at PG Bank have yet to achieve significant success The bank's card offers dual functions, serving as both a credit and debit card, and includes the capability for petrol payments This card holds promising potential for future growth.
Evaluation of some financial ratios:
Our group has collected some information about financial ratios of some banks
Graph: 2-20: ROA; ROE of some banks throughout years
Return on equity of PG Bank
(Source: Annual report 2010 of PG Bank)
Graph 2-21: ROA of PG Bank throughout years
The graph showed the steadily increasing returns of PG Bank in 2008, 2009,
2010 with 20% return on sales ratio in 2010 PG Bank succeeded in making best use of shareholder’s equity PG Bank returns on sale ratio is higher than that of market (17%)
Return on assets of PG BANK
(Source: Annual report 2010 of PG Bank)
Graph 2-22: ROE of PG Bank throughout years
The return on assets ratio has fluctuated over the years, reflecting the performance of PG Bank within the Vietnamese economy In 2010, PG Bank achieved a return on assets ratio of 1.6%, indicating effective capital mobilization from various sources and strong profitability This performance positions PG Bank favorably in comparison to the broader market.
Graph 2-23: CAR of PG Bank throughout years.
According to the circular no 13, CAR of every bank every time must be higher than 9% PG Bank always has CAR as required This shows the independence in business activities.
PG Bank's financial situation is generally transparent and shows consistent growth over the years However, the bank faces limitations, such as not fully leveraging the Petrolimex brand and underperforming in key metrics like Return on Assets (ROA) and Return on Equity (ROE) To gain a deeper understanding of both its successes and challenges, it is essential to examine the business environment in which PG Bank operates.